Ending the Dead-End-Job Trap

By Terri Gerstein and Sharon Block

Ms. Gerstein is a fellow and Ms. Block is the executive director at the Labor and Worklife Program at Harvard Law School.

July 12, 2018

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On Thursday, the attorney general of Washington State announced that seven fast-food chains, including Arby’s, Carl’s Jr. and McDonald’s, had agreed not to use “no poach” or “no hire” agreements.CreditCreditRolf Vennenbernd/picture-alliance, via dpa, via Associated Press Images

It’s the American dream: We’re supposed to improve ourselves, get a better job, move on and up. But in too many instances, secret agreements between employers are stifling workers’ ability to parlay their hard work and experience into better-paying jobs and a chance to climb the career ladder.

On Thursday, the attorney general of Washington State, Bob Ferguson, announced that he had obtained agreements from seven fast-food chains, including Arby’s, Carl’s Jr. and McDonald’s, not to use or enforce “no poach” or “no hire” agreements. Under these arrangements, franchisees pledge not to hire job applicants who are current or recent employees of the company or any of its franchisees, without the approval of the applicants’ employers.

This crackdown on a widespread practice is a welcome development. But as Mr. Ferguson made clear in his announcement, he is still “investigating other corporate chains that utilize no-poach agreements.”

And he isn’t alone. On Monday, attorneys general from 10 states and the District of Columbia announced that they sent letters to Burger King, Domino’s, Dunkin’ Donuts and five other leading fast-food companies, seeking information about whether those companies use these no-poach or no-hire agreements.

So there is still much to be done to get rid these of dream-stealing restrictions, which are all-too common in low-wage businesses like temporary agencies and fast-food companies. A study published last year by the Princeton economists Alan Krueger and Orley Ashenfelter found that 80 percent of franchisers examined in the quick-serve restaurant industry made use of these arrangements. (These restrictions don’t prevent workers from jumping to another company altogether.)

Where these no-poach or no-hire agreements exist, a worker could apply for a job, and despite years of experience and perhaps an exemplary record, fail to make it even to the interview stage. The worker might never know why, because these no-hire agreements are between the franchiser and its franchisees — they’re generally not disclosed to employees.

If workers can’t leave their jobs to get a better position that they are qualified for, their bargaining power to seek better pay or working conditions is diminished. This situation, along with the decline of unions and other trends, helps explain why wages have not kept up with the greatly increased productivity of the last few decades.

These agreements may well be illegal under antitrust laws, which protect not only a competitive market in products but also a competitive labor market. In 2010, the Department of Justice used antitrust law to force a settlement with six major high-tech companies in Silicon Valley that ended their practice of agreeing not to solicit one another’s workers.

Just to make sure that this kind of harmful behavior is easier to detect and stop, Democratic Senators Cory Booker of New Jersey and Elizabeth Warren of Massachusetts, and Representative Keith Ellison, a Democrat from Minnesota, introduced legislation this year to make no-poach agreements illegal. Their bill would give the Federal Trade Commission enforcement powers and make it easier for workers to sue.

By seeking documents from fast-food companies that lay out the business rationale and operational need for no-poach agreements, the attorneys general are getting at the heart of the issue. Are these agreements, which prevent workers from moving among locations, really an operational necessity? It seems unlikely, unless the business models of these companies require them to suppress wages as much as possible to succeed. The fact that seven national fast-food chains have now agreed to end this practice demonstrates how unnecessary these no poach agreements are.

Fast-food companies are hardly model employers in their treatment of the people who actually do the work of making the pizzas and frying the fries. Their labor-law compliance record is by and large dismal; major players in the industry have violated minimum wage, child labor and earned sick leave laws, among others. Their trade association, the National Restaurant Association, is one of the fiercest opponents of raising the minimum wage.

The fast-food industry still has a lot of fixing to do in terms of how it treats its people. The agreements reached in Washington State are a positive step for the seven companies involved, but this should be an easy one for all fast-food companies. Burgers and fries, pizza and doughnuts — they may be all-American, but keeping workers stuck in place is not.

Terri Gerstein is a fellow at the Open Society Foundations and at the Labor and Worklife Program at Harvard Law School, where Sharon Block is the executive director.